Correlation Between Epsilon Energy and EQT
Can any of the company-specific risk be diversified away by investing in both Epsilon Energy and EQT at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Epsilon Energy and EQT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Epsilon Energy and EQT Corporation, you can compare the effects of market volatilities on Epsilon Energy and EQT and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Epsilon Energy with a short position of EQT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Epsilon Energy and EQT.
Diversification Opportunities for Epsilon Energy and EQT
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Epsilon and EQT is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Epsilon Energy and EQT Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT Corporation and Epsilon Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Epsilon Energy are associated (or correlated) with EQT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT Corporation has no effect on the direction of Epsilon Energy i.e., Epsilon Energy and EQT go up and down completely randomly.
Pair Corralation between Epsilon Energy and EQT
Given the investment horizon of 90 days Epsilon Energy is expected to under-perform the EQT. But the stock apears to be less risky and, when comparing its historical volatility, Epsilon Energy is 1.19 times less risky than EQT. The stock trades about -0.02 of its potential returns per unit of risk. The EQT Corporation is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 3,604 in EQT Corporation on August 24, 2024 and sell it today you would earn a total of 1,085 from holding EQT Corporation or generate 30.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Epsilon Energy vs. EQT Corp.
Performance |
| Timeline |
| Epsilon Energy |
| EQT Corporation |
Epsilon Energy and EQT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Epsilon Energy and EQT
The main advantage of trading using opposite Epsilon Energy and EQT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Epsilon Energy position performs unexpectedly, EQT can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EQT will offset losses from the drop in EQT's long position.| Epsilon Energy vs. Vaalco Energy | Epsilon Energy vs. PHX Minerals | Epsilon Energy vs. Northern Oil Gas | Epsilon Energy vs. Granite Ridge Resources |
| EQT vs. Antero Resources Corp | EQT vs. Matador Resources | EQT vs. Devon Energy | EQT vs. Diamondback Energy |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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